Good day, and welcome to the Equifax Third Quarter 2020 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Dorian Hare. Please go ahead.

Thanks and good morning. Welcome to today’s conference call. I’m Dorian Hare. With me today are Mark Begor, Chief Executive Officer; John Gamble, Chief Financial Officer. Today’s call is being recorded. An archive of the recording will be available later today in the Investor Relations section in the About Equifax tab of our website at www.equifax.com. During the call today, we will be making reference to certain materials that can also be found in the Investor Relations section of our website under Events and Presentation. These materials are labelled Q3, 2020 Earnings Release Presentation. During this call, we will be making certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in filings with the SEC, including our 2019 Form 10-K and subsequent filings. Also, we will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. Certain revenue variances referred to in this call are based on adjusted revenue from the third quarter of 2019. These non-GAAP measures are detailed in reconciliation tables which are included with our earnings release and are also posted on our website. Now, I'd like to turn it over to Mark.

Thanks, Dorain good everyone and thanks for joining our third quarter earnings call. Businesses and consumers around the world continue to face challenges brought on by the COVID-19 pandemic. I hope you and your families are continuing to be safe in managing this unprecedented environment. At Equifax, we continue to make the health and safety of our 11,000 employees a top priority. Turning first to the slide deck on page number four. Before I cover our very strong third quarter performance, I wanted to recap our focus over the past 3 years to transform Equifax to drive revenue growth, margins and cash in the future. Today, we saw a unique industry and vertical customer and consumer challenges through our differentiated data assets and best-in-class, advanced analytics. Most of our differentiated and -- our most differentiated and most valuable data asset is our 2020 income and employment data. We are building an industry leading global native cloud data technology footprint enabled by best-in-class cloud-native tools that will leverage our new cloud based single data fabric. We’ve taken an industry leadership position in data security by changing our culture, our technology solutions and governance to ensure customer and consumer data is safer than it has ever before. We're relentlessly focused on a customer-first mentality, and we have a market-leading position in 25 countries. In building the new Equifax, we are executing on our $1.5 billion cloud, data and technology transformation that will move our data to a single cloud-native data fabric and into our legacy applications to the Google Cloud. We’re ramping up our investments in innovation and product resources to drive new product acceleration by leveraging our cloud investments. We’re strengthening our differentiated data portfolio with new unique data assets that complement our view of consumers. We’re leveraging advanced analytics, our…

Thanks Mark. I’ll generally be referring to the financial results from continuing operations represented on a GAAP basis, but we will refer to non-GAAP results as well. In the third quarter, general corporate expense was $155 million. Excluding non-recurring cost adjusted general corporate expense for the quarter was $109 million, up $38 million from 3Q 2019. Corporate function expenses, such as, finance, HR and legal were down year-to-year, reflecting the cost containment activities we outlined in April. The increase in total general corporate expense is primarily due to higher incentive compensation costs in 2020 due to our strong and improving financial performance. We continue to exercise disciplined cost management across the business, while also continuing to invest in our technology transformation, data and analytics, new products and securities. We will accelerate investments in these areas in 2020 as we believe this will deliver accelerated benefits. Outside of these areas, head count additions remain at levels below attrition, and discretionary spending has been reduced. Across the company, business travel remains at very low levels. For 3Q 2020, the effective tax rate used in calculating adjusted EPS was 21.2% and in line with our expectations. We expect the 4Q 2020 tax rate and full year effective tax rate used in calculating adjusted EPS to be around 24%. In 3Q, 2020 and year-to-date, operating cash flow of $367 million and $645 million were up $532 million and $566 million, respectively from 2019. The increases reflect the substantial improvements and operating performance in 2020 as well as lower payments for litigation settlements in 3Q 2020 and year-to-date of $341 million and $246 million, respectively. The timing of payment of the remaining $347 million to the U.S. consumer restitution fund is principally dependent on the resolution of the appeals filed related to this case. At…

Thanks, John. I’ll wrap up with an update on our cloud technology and data transformation and our accelerated focus on new products. Turning to slide 16. Equifax continues to make very meaningful progress on our cloud data technology transformation. We’re energized by the revenue, cost margin and cash benefits we expect from our cloud investments. Through a single cloud native data fabric and common cloud -- global cloud based infrastructure, to be able to innovate, to develop more robust Product Solutions and multi-data insights that are portable around the world enabled by our differentiated cloud data technology to be able to unlock new use cases and verticals, with our solutions for new and existing customers. Our cloud based infrastructure will also enable us to accelerate the velocity at which we can develop new products from months to weeks. Accelerating the benefits our customers receive from these products in driving our revenue growth. We’re already starting to see increased system availability as we move from our legacy technology into the cloud and we expect this trend to continue. All the non-capability are table stakes and global technology company we believe that as more customers moved to the cloud -- the cloud operability will deliver best-in-class systems availability, and customer interaction seamless and faster. And lastly, we’re continuing on our path to being industry leader in data security. Our security is core to everything we do that by advancements in data governance. We know that data security is a battle that we must fight alongside our industry peers and our customers every day. Starting to slide 17, we moved in the final phase of our North America technology transformation with a focus on customer migrations. We continue our progress to migrate our customers into our new cloud based systems, including our InterConnect…

Thank you. [Operator Instructions] We will take our first question from Kyle Peterson with Needham.

Hey, good morning, and thanks for taking the question. Just wanted to start on the margins. It looks really strong this quarter, especially within EWS and others have been kind of marking up over time. Do you think what we saw on the margin side could be sustainable in monolized environment? Or is there anything like one-time that we should be thinking about from this quarter?

Yes. It's a great question. You've seen over the last several years, and certainly in 2020, strong top line performance from Workforce Solutions and that has certainly translated into margin growth. As you know, in our industry, internet business in particular, but in all our businesses incremental revenue growth drives very attractive incremental margins. We've seen a very strong performance in 2020. We expect that this is to continue to perform in the future. And I think we're prepared to give a guidance around margins for the future, because we can't do that broadly. But we've got a lot of confidence in the Workforce Solutions business, given the multiple levers that they have to drive future growth.

Got it. That's helpful. And then just one follow-up. I know you mentioned the [Indiscernible] increase, now that you're talking about one inquiry in twin for every two or just like mortgage origination inquiries. What do you guys find is the biggest gating factor to getting that moving that ratio higher. Is that more like lender awareness of those database or is it just that you just need to keep pushing the snowball down the hill and adding more employers and records onto the network?

Yes. It's less about the employers and records. It's really what you pointed out. It's really getting into one of our customers and showing them the value of the product. It's also driven by new products. We talked about in the last couple of calls that Workforce Solutions is rolling out new products that provide multiple polls and a package for mortgage application as one purchase from Equifax. And we see that driving some of the polls. We also see the system and system integrations being a real driver, where we're getting embedded in our customer workflows. And we've got a dedicated team that works on that with our customers to show them the value of the income employment data. And then, as you pointed out just getting in front of customers, so they understand, the lift they're getting in predictability. If you're a mortgage originator, and you're going to spend, call it $4,000 in a mortgage application. When you start that application process, you want to make sure that you're working with a customer that is going to be able to be approved. Part of that is historically pulling the credit file upfront to understand what the credit profile of that customer. And that's kind of a common practice today, increasingly, the more sophisticated mortgage originators are starting to pull upfront, the income employment data, particularly in this environment, understanding where are people still employed and then pulling it multiple times. So those are just multiple opportunities that the team has in using mortgage as an example. And, of course, the same holds in other verticals where we're seeing, particularly the database becomes almost a catalyst, it's over -- well over 50% of the non-farm payroll, it's becoming an asset that the hit rates are very valuable in multiple verticals beyond mortgage.

We'll now take our next question from Manav Patnaik with Barclays.

Good morning. Maybe I can just follow-up there. The mortgage digitalization, I guess, is the big team out there. And we're seeing a lot of acquisitions for my Equifax. There's a whole bunch of stuff going on out there. And I just, besides, trying to get more penetration, the way you just described it, like how do you look at the opportunity with that team? And do you have plans with other solutions, and the name. Would you just talk there would be helpful?

Manav, I apologize, I miss the first portion of the question. Can you give us a quick reference?

Sure. It was tied to the team around mortgage digitization, I guess, and there's a lot of opportunity striving from that. And I was just wondering if you had broader plan for your mortgage business outside of just kind of seen a little bit more penetration that you just talked about?

Yes. Obviously, we have a large mortgage business. We're benefiting from the market tailwinds. We've got a real focus on rolling out new products, in particularly Workforce Solutions, but also in the USIS, our UDM products, are another growth area for us. And I think what we're pleased with is the fact that both USIS and Workforce Solutions are outgrowing the mortgage market. Now, how do you do that? Will you do that with new products, new solutions, blogging more usage of your products, in particular, that's around the twin income employment database were pulled more frequently. And then just the system, the system integrations where we still have a lot of one way to work with our customers to convert them from dialing in and keying into the system on an individual applicant basis to pull the income employment data to go into system integrations, which is as you know is more on the credit file side. But it's one that's an opportunity on the income employment side. And that really we've seen big lifts in utilization, when we are embedded in the workflows and the income employment data. We've had great progress in adding those in the third quarter in 2020.

Got it. And then just a check on the Tech Transformation. When you started the program, you're talking about $1.25 billion is the number and it's a pretty big number you talk maybe you left some buffer room in there. But last time you said 1.4, and I think you said, it was a 1.5 billion program. So I was just curious, that incremental 250 million like, I guess where did we go over budget? Or where's that extra spend are being required today?

Yes. And that's been an area that we've been clear that we're going to invest more. We see opportunities to do that to accelerate the transformation. And just to be clear, and I know you notice, but $1.5 billion we now talk about is the incremental spend in 2018, 2019 and 2020. So that's going to be behind us. And that's how much we're going to spend through the end of the year. We'll obviously be spending money on our technology as we go into 2021 and beyond that, that's going to be in our one rate spend versus the incremental spend that we talked about. And with our strong financial performance in the second half of 2019, we started investing more in the Tech Transformation. And as we continued in 2020, and performed so strongly during the COVID recession, we've made strategic decisions to accelerate our spend in order to drive it more rapidly. We think that's the right thing to do, because of the sizeable benefits that we expect to get from the transformation.

Our next question comes from Andrew Steinerman with JPMorgan.

Good morning. Just two questions. The first one I didn't catch if you gave the total Equifax third quarter revenues related to mortgage. So, I'd like that if you could. And6 then looking at slide 13, under EWS, non-mortgage, September stood out to me how it jumped forward. And then, sort of October kind of normalized back to July, August rates. Could just talked a little bit about that September come forward?

So, in terms of total mortgage revenue, total mortgage revenues are little over a third of Equifax total revenue. So that's the best way we'll estimate that. In terms of September non-mortgage for EWS, we have substantial business with government and other participants. And so it can just be a little choppy. And obviously, the underlying revenue base isn't that large. So just movements between months can result in different growth rates between the months quite understood, so that's why we indicate that when you're looking at those numbers you can consider them indicative. And that's why we focus a lot more on the quarterly numbers.

Thank you.

We'll take our next question from Toni Kaplan with Morgan Stanley.

Thanks so much for taking my question. Just wanted to ask broadly about how you're thinking about the trends in consumer credit. On one hand, we've heard some lenders talking about borrowers, more borrowers exiting forbearance, and defaulting, which could impact the appetite for lending. But on the other hand, you have recovery trends taking hold and the economy with things opening up. So wanted to hear broadly about that? And specifically, also just wanted to ask about the sort of better September non-mortgage number within USIS. And then October getting a little bit more in between like, where September and the other months of the third quarter are?

The first half of the question, Toni, it’s obviously complicated. It’s a -- economic event, a health event, like we've never seen before. Kind of broadly, the consumer is still fairly strong. Obviously, there's high-end employment, but some of the stimulus benefits that help the consumer. When we talk to our customers, their delinquencies, they are not increasing yet, because they're making minimum payments, and they're not behind in credit card payments, et cetera, kind of I'm talking broadly. So I think that's kind of what's happening so far. I think what we're all watching, is what happens as stimulus dollars one out. Are they're going to be using dollars, either pre or post the election in a few weeks, its tough to see. Where's unemployment going to go? Yes. And on top of that, what's the timing of vaccine? How quickly will it be deployed across the population, which obviously will drive economic activity. It's just a lot of challenging messages there we try to work through. What's underlying that, from our perspective, is that data is more valuable than ever for our customers. And that's what we're seeing. Obviously, our performance is quite strong. Data is being used to try to look through to who are the customers, the consumers that are still working. Who are the consumers that can take a line increase or having a mortgage refi or what is the data? So I think that's a positive for our industry. But you point out, which is why, we struggled providing guidance for the fourth quarter of 2021. At this stage, it's still quite uncertain about where that consumer is going.

In terms of your question on September at minus three and in the quarter minus five and our discussion around mid-October at above minus five. Again, the above minus five and above minus three to us are very similar numbers, right? And September's monthly data. So I think the important fact is we are seeing an improvement trend. We expect that we're seeing our business improve in non-mortgage, and we're very happy with that trend. But as we look through the rest of the fourth quarter, above 5% is can be a little bit on either side of 5%.

Our next question comes from David Togut with Evercore ISI.

Thank you. Good morning. And appreciate all the helpful disclosure in the deck. The number one investor question I receive on Equifax is whether revenue and earnings growth is peaking given this extraordinary mortgage market expansion, which clearly benefits both USIS and EWS, along with the increased appetite for TWN employment and income data during the COVID pandemic. And clearly there are a number of positives that will sustain, the 20% growth and TWN records, the growth in NPI, the growth in the pipeline. But as you start to think about a 2021 framework, you want people to start with that 6% core growth from the third quarter. What are some of the parameters that you're starting to think about as you frame your own views for 2021?

David, I think we're going to try to avoid getting you to 2021 guidance, but we were quite intentional because we're getting the same questions you're getting about what -- how do we look through Equifax is very strong performance in the year, particularly from the incremental UC claims revenue, which is meaningful, that we've highlighted will likely normalize in 2021 with unemployment, presumably coming down our unemployment claims not continuing. And then, of course, the U.S. mortgage market. U.S. mortgage market, that's one that is difficult for us to -- John talk a little bit about that one. We can't forecast what's going to happen in 2021 on the mortgage market, but the fundamentals are still quite positive for 2021 in the U.S. mortgage market with the Fed stating pretty strongly that they're going to keep interest rates at the record lows through 2021. That's a positive for refinancings and for purchase volume. We've seen purchase volume really accelerate in the last 90 days in the United States. Consumers are going out to buy homes or upgrade to get larger homes or move to the suburbs. And again, we're not forecasting, but it feels like there's some legs on that macro. And then of course, the refinance side, there's still a very sizable population, as John pointed out by consumers that have not refinance their mortgages yet, that there's multiple quarters of that benefit. With regards to 2021, you highlight some of the positives for Equifax. You can start with a lot of businesses are still challenged by the COVID pandemic and we're not forecasting 2021. But if you believe that there's going to be a vaccine, and the vaccine is going to result in more normal recovery of some sort, that's going to be good news for Equifax.…

Appreciate that. Just a quick follow up on capital return. Will you be in a position to do more in terms of capital return as we approach 2021 in terms of dividend growth by that more M&A?

Yes. We've been clear that, again, I don't want to give guidance. And as you know, we don't have a financial framework in place. But we've been pretty clear that our goal to get back to that. We've been investing heavily in our Tech Transformation. And we're getting the big spend in our Tech Transformation, certainly behind us in 2020. And our three-year plan. And we believe that our cash generation will accelerate as we go through 2021, 2022, 2023, which is going to provide free cash flow for us to invest in M&A, which we talked about earlier in the call. It's our intention to have more focus there. And we don't want to give any guidance around. Our intent to do a buyback or reads a dividend growth. But we've had that framework in place before. And we'll certainly consider its a right time when we put our financial framework and capital allocation plan back in place in the future.

Next question comes from Kevin McVeigh with Credit Suisse.

Great. Thank you. I just want to spend a minute on the progression of the client in EWS. Ultimately, it looks like the average client size was about 4,000 back in 2008. And that number is closer to 110, based on just specific next kind of client versus records in the work number. Do the needs of the smaller clients kind of increase? And is there any way to frame what the opportunity is as you kind of triangulate from the dollar perspective, kind of the work number with the core USIS as you look at a little bit. So just trying to get a sense of, again, the market opportunities as you build more down market, and then what that can meets the enterprise overall?

Yes. First off on, more records is more value, right? And more contributors is doing, they are moving up 6 million records this quarter. We think is a big milestone where we were flat in the second quarter. But there's some bumpiness to when records come in, and we had a very strong order of execution there. We're up 20% in records year-over-year. As you know, that's going to drive hit rates and revenue growth going forward. And then to your point, you did see really the addition of some more companies. There's all kinds of numbers out there on how many companies there are in the United States, whether it's three or four or five million, but going from 69,000, a year ago to a million companies really does increase the breadth and depth of the database. So that's very, very positive for Equifax and for our customers. As you know, one area where the database is huge, is what I would call, the near-prime or sub-prime customers, and you see those customers and all kinds of companies, but adding more companies, million companies just brings more value to the database. And we're really intently focused on continuing to grow the database. We also mentioned earlier in the comments that getting to this level of scale, having 88 million uniques, or 107 million active, as well as inactive, really takes the database almost as a catalyst of being very, very valuable just because they hit rates go up. And the other thing I've commented on is that the team is expanding their focus. We've had a W2 focus on non-farm payrolls for a long, long time. And in the last year, we started to expand that focus around the gig economy 1099 that we're actually ingesting now into our database, 1099 income data. Pension data is another one that we've got our sights set on for those. We're going to hit towards non-farm payroll, that's going to take time. But we've expanded our focus to go well beyond that to get all levels of employment or other income that consumers are having. So it will become really one stop shop for all that data.

Got it. And then just to follow-up on that real quick. I know, obviously, the focus been on the mortgage side, seems like there's a opportunity to flush that out across other credit instruments as well? Is that so?

It is. That's a big focus for us and we talk on prior calls that the values always been there. And we shared with you and others that if you take credit data, and add income employment data to what the predictability or the chaos for from that decision goes up dramatically. So that's always in the back, it's one that we've been sharing with our customers for years. The COVID crisis has created a catalyst for that. And we talked about in the last call. On the second quarter call that we're seeing, for example, credit card customers. We've got a couple of major credit card customers that are now embedding the work number data into their origination workflows, so adding it to the credit file. So that's a big deal for us to get into that space. In the auto space it’s been used in closing for sub-prime customers, and now we're seeing it used more broadly because it increases the predictability of that underwriting decision. And so, it's really around our focus on differentiated data. But of course, the twin income and employment data is just very, very unique in that scale, which provide real value and of course, we didn't talk about it in this call, that government is also was very fast growing vertical for us. I talked about the new social security administration contract that extend in 2021. That's an example of how we're expanding the use cases of the twin data. And then of course, another growth area for us around the data is in employment decisions. When you're hiring someone, we call it talent solutions. So that's another area that we see future growth. So there's just a lot of levers for growth in that business.

Our next question comes from Ashish Sabadra with Deutsche Bank.

Well, thanks for taking my question. And thanks for the clarification on the FMS. My question -- follow up question there was, when does that difficult comps form a big client and last year anniversary and when do you start seeing FMS get back to a more normalized growth profile? Thanks.

Sorry. You're breaking up a little bit. Could you repeat that question.

Oh, sorry. Sorry about that. My question is on FMS. There was a difficult comp there. I was just wondering when does that difficult comp anniversary? And when do we get back to a more normalized growth in the FMS business?

Yes. So your questions about the FMS business. First off, we're still in the COVID recession. And you know, that business provides data for both portfolio management and marketing. And as I pointed out my kind of say, John did too, lot of our customers have curtailed or slowed down, do account originations which affect their business. And so, when you talk about normalized growth, the first thing, or the biggest factor that's going to drive that will be a resumption of originations, which we started to see. We kind of did that. And we had a couple of customers in the quarter in September that started to originate -- started origination, and actually had origination volumes without -- revenue with us that were above last year. So we're starting to see signs those originations. John pointed out, we also add some a couple of larger deals if you will in 2019. And I would attribute that some part of the USIS recovery that haven't repeated in 2020. I would characterize most of that is driven by the COVID recession and the impact decisions our customers are making around assumption on originations. But we all know that our customers will start originating again, once their confidence grows, they have to -- that's a part of your business. You have to continue to add new customers. So it's just a matter of when they start doing that. And we would expect the business to grow there. On the portfolio management side, that's one where we've seen some increased activity. As customers are focused on managing the back book, we would expect that to continue to be a positive tailwind as we move into fourth quarter of 2021. Its typical as you're coming out of the recession, or in a recession, there's a lot of focus around managing your existing portfolio.

That's very helpful color. And maybe just a quick follow up on the cost savings. Thanks for those details. I was wondering could you have a timeline by which we should start seeing those savings flow to the bottom line? And any incremental thoughts on how should we think about investments going forward? Thanks.

That's one that we're not ready to get 2021 guidance, we're not giving guidance on. It is our plan to provide some visibility in the future -- in the near future around what we expect some of the benefits to be in 2021 as we have some level of framework for 2021. We're not sure we're going to be able to provide guidance. But we'll definitely do that. We're not ready to do that today. That said, we have been quite clear around what we expect the benefits to be, the sizing of the cost benefits that we're going to get from the cloud transformation, the cash benefits we expect to generate, which we believe are sizable. We haven't framed yet. We expect the revenue benefits to be -- those will all be firmly embedded in a long term framework when we put it back in place.

The next question comes from George Mihalos with Cowen.

Great. Good morning, guys. And thanks for taking my questions. I guess first to kick things off. Mark, I think you said that about 20% of verification revenues coming from inactive accounts. And I'm just curious, how long can an inactive account could be monetized? What's sort of the lifespan of an inactive account? And then, does that really skew to one vertical within EWS more than any other? So for example, mortgage where you're bundling services or something like that?

That's great question. One, we haven't talked a lot about, 20% is a big percentage of our revenue. It's really going to -- every vertical has different use cases were having a multi-year period, multi-year history of someone’s employment is quite valuable. There’s a use case, which is someone working today, and how much did they make. And then there’s other use cases as well, that they’ve been working for the last 12 months, they have been working for the last two years. And as you know, people change jobs. So having a, multi-year, or a multi-job work history for someone is quite valuable. We have something like an average of 4.5 jobs per unique individual in the database, which makes sense. There’s a lot of people that change more often over a five-year period, six-year period, two-year period than others, and then some that are in the same job. But that history of data is incredibly valuable. And there’s some use cases where you have to have the history. So not only having what someone is doing today is less valuable, which really go down the path of like a someone who’s going to provide a pay stub, that might work in some situation, most of our customers don’t take those anymore. But would you have a use case, if someone wants to know, where did you work for the last two years, the only way to really prove that, and get it quickly and completely and accurately is to come to Workforce Solutions. So that’s a wide data and if you go around verticals, it’s really in every vertical, it’s mortgages got a lot of use cases where it’s very, very important to have a history of work, employment and income, auto has it, card, less so, all of those use cases where some card issuers are looking at that. In the government space, it's valuable, both today as well as history, and it just reflects the value of the business. It’s taken as a decade to build up that 450 million records on individuals, it’s just very, very valuable.

Okay. That’s super helpful color. Really appreciate it. And then just as a quick follow-up, I think obviously, within GTS partner is under increased pressure. And yes, I think if I caught the comments, you were suggesting that it will stay weak through the first half of next year. I’m just curious if you could talk a little bit about the visibility that you have in that channel of the business going forward?

Yes. I think we said during the first half of last year, I think we said we expected it to stay soft through the fourth quarter. We don’t have visibility, just to be clear. But in our discussions with customers in that space, which is really in the lead generation space, it goes back to the origination point I had earlier around our USIS FMS business, customers, originators, whether your bank card or personal loan, clearly curtailed in the COVID recession, their origination. So that impacts our business and also impacts some of our partners to use our data in that Lead-gen space. So that'll come back over time. We don’t know what it is. It’s hard to forecast. As we look out to the fourth quarter, we expect it still to be weaken the fourth quarter on the Lead-gen side, just because we don’t see signs. We see signs of improvement, but not to where it was a year ago.

Okay, great. Thank you. I misheard that one.

Our next question comes from Hamzah Mazari with Jefferies.

Hey, good morning. Thank you. My first question is just on the tech transformation timeline. Anyway to think about the risk that that timeline bleeds into sort of 2022 with COVID?

Yes, we’ve been pretty clear on all of our calls during the COVID recession that, we’ve been meeting our milestones. And we think that don't change our plans. And we talked a bunch on the call this already this morning around -- etcetera being in the cloud. So we’re very pleased with our milestones. We’re also very pleased with our migrations, remember just two people detect transpiration. One is getting the technology right and getting our data assets and application to the cloud. And then second is migrating our customers to waiting. So you saw that we’re making good progress in the third quarter. And we expect to make good progress in the fourth quarter. So, we’re pleased with our progress, and there's still a lot of work to do, but we are meeting our internal milestones that we’re trying to share with you transparently.

And we compare that the focus is on North America, which is like 80% of the revenue. And we have indicated that some smaller properties or smaller business would trail out further into the future. But that will just become normal spend.

Great. That’s very helpful. And you just want to follow-up on the mortgage market, specifically. Just on Fannie and Freddie any potential changes there, under either administration either more autonomy, new capital rules, privatization. Just any chatter on Fannie and Freddie and how that may impact you? Or is that not really a big deal? Thank you so much.

Yes. We don’t -- that there’s a lot in that question. You get into what can happen, the elections versus Democratic versus Republican that you got to get into all that set in etcetera. I think that’s probably a longer question. But I would say more broadly, specifically to Fannie and Freddie, we don’t see any change in impacting Equifax if administration changes or not with Fannie and Freddie. Frankly, more broadly we don’t see that how Equifax operates. We provide a very valuable service to U.S. consumers and to our customers. And we don’t expect them to change whatever happens in November.

We’ll take our next question from Bill Warmington with Wells Fargo.

Good morning, everyone. So this new I-9 product you guys introduced last week that takes the I-9 Management Suite down market to the small and midsize businesses. I realized that’s part of the Employer Services, but and non-verification services. But is a strategy to use the I-9 product as a source of new leads for the work number?

We like our talent solutions and Employer Services business is a compliment to our verification services business. And for us the idea of having more connections and services, with the HR manager who was providing us in making a decision to provide us their payroll records for the verification side of the business we think is positive. So, there’s no question, we want to continue to expand, the services and products that we provide. On the I-9 side, we introduced a number of I-9 products that we’re really pleased with in their performance on an I-9 anywhere that allows the expected employee to complete that process remotely, using a digital solution and in some of the smaller company products that we’ve introduced. It’s just examples of our focus on innovation and new products, hope to drive the business but to expand our relationship as I would characterize it with the HR manager. So we have more connections for the broader ecosystem that were for solutions.

Got it. And as a follow-up question. Just wanted to ask on the social security contract, that’s starting up next year, the 40 million to 50 million in revenue, any additional color on the timing of the start of that revenue beginning of the year, middle of the year, something?

Yes. Too early on that one. We certainly expect revenue in 2020, which is why we’ve talked about it that way. A full run rate is going to be to $40 million to $50 million. It likely won’t be full run rate for sure in 2021. But we’re actively working on the technology elements with our customer and driving it forward. We talk about this contract just because of the size of it. It’s unusual to have a contract of that size get landed. But it’s just a reflection of the value of the Workforce Solutions data in so many different verticals and use cases in this case and the government space with the Social Security administration.

Our next question comes from Andrew Jeffrey with Truist Securities. Andrew, you may have us on mute.

Hi, guys. Appreciate you taking the question. It’s been a long call, full of good information. Mark, I just wonder if you could address Equifax’s position in Fintech. I know it's one of the areas in COVID that’s maybe been a little bit weaker than some of the structural growth areas that you enumerated, but maybe a cyclical outlook there and also market share plans and outlook would be helpful.

So, I think, we’ve been clear, it’s a space that we refocused on and started building out resources in the latter part of 2018. We added resources in 2019. I think from commercial resources, we’re up probably between 2x and 3x what we had two years ago. So it’s a space we want to be bigger in. We think we are well positioned to be bigger in it. We have pretty strong market position with most of the Fintechs with our TWN data where it’s used, and of course, it’s expanding usage during COVID. And we are working to take advantage of that relationship to move some of our credit data in. We’ve had some positive wins. It’s, I don’t know, $250 million market in the United States. I think you know our competitors are much stronger than we are. But we think there’s room for Equifax to grow. Many of those are single-sourced in the Fintech from starting out that way, and they’re getting to scale where they could be dual source, which prevents an opportunity for Equifax, particularly when we’re already in the door with our TWN data. They have been more impacted than how we characterized an FI, particularly because of their funding requirements. They typically aren’t balance sheet funded. So they’ve been more impacted on originations. But we stayed supporting them, and we’re continuing to have some commercial wins during the last couple of quarters in that space. And it’s an area that, since saying in the USIS team we are focused on, for growth in the future. We see it as a strategic market for us going forward.

Thank you. Appreciate it.

We'll take our next question from Andrew Nicholas with William Blair.

Hi. Good morning. Can you speak to the potential for competitors to replicate certain aspects of the work number database in the U.S. over a longer time frame? It certainly seem unlikely that they’ve had the same level of integration with employers and the same number of employers. But are there other ways to gather some of the same data aspects, whether it be through some of the payroll processors or analyzing demand deposit accounts? I guess, I’m just wondering, how you protect your moat there and whether alternative approaches to gathering income and employment data could result in alternatives for your customers down the road?

Yes. We think we have real scale in the business, which provides a competitive advantage for us at Workforce Solutions. We’ve owned this business for over a decade. And we’ve invested between the acquisition of business and what we’ve invested in technology and resources, a couple billion dollars over the last 10 years. And the scale of the business, we think provides some real strength in the competitive advantage. We talked about the history of the data, which is really hard to get, on an individual, worried about people or work the last two years or here at Equifax, where do you work the two years before that or the two years before that, collecting that data is quite challenging. We’re participating in some of the other ways to collect data, you pointed out, bank transaction data and trying to impute it in, the net pay in someone’s bank account that’s a data source, but very difficult to get, the consumer have to consent to give the data. So we think that -- quite challenging. So we think there’s just a lot of strengths around the business, we’re always looking at who our competitors are in every business. And but this is one where we think we have similar market strength, given the scale of it. Maybe as you point out, the network of connections we have with so many customers. And then of course, we’re now having a billion companies to deliver data to us on a fee per unit basis. And that makes this data set very, very valuable and tough to replicate. And if you’re a company, you’re likely not going to give the data to two companies. You’re going to give it to the company that’s been here for a long time. And we think that’s another important element for Equifax, our strength of the business, our proprietary and security around it, the fact that we authenticate anyone who uses the data before they’re able to use it. There’s just a lot of security and protection around that, which is very important to those actually to own the data and contributed to us.

Got it. Yes. That makes sense. Thank you. And then switching gears a little bit on my follow up. So maybe you can speak to the margin performance in the international business in the third quarter? Margin expanded quite nicely year-over-year, despite the revenue decline. So I was just wondering if there’s anything you point to specifically on the cost front in that segment, and they are now permanent [ph] some of those savings could potentially be?

Yes, we did some costs work in International in 2019 that we’re getting benefits from. And then there’s been some tightening during 2020, during the COVID pandemic, as you point out, with pretty strong performance on margins. Given the revenue declines, which are still quite substantial in International because of the COVID pandemic. So, we expect those -- the COVID pandemic to get behind us economic activity improves that obviously, revenue should go with that and improve it, should be positive for the margins of that business going forward.

We will take our next question from Jeff Meuler with Baird.

Thank you. Good morning. So, John, I think you tried to print this question with the bridge you gave us on the slides. On the Q4 illustrative framework, EPS being down slightly on low double-digit revenue growth, it looks like a lot of the headwind factors are calling out in your bridge have been with you kind of all year. Yet, you had good EPS growth year-over-year, the first three quarter, so anything else to call out on Q4 EPS in the framework?

Yes. The only other thing you see, you see although it’s a little bigger than it’s been in some of the other quarters, right? And that’s really driven by the fact that the comment I made around corporate expenses, you’re seeing a significant increase in incentive compensation because of the fact that the business has performed so incredibly well over the past two quarters. Our expected performance has improved quite significantly, and you’re seeing that across different areas of incentives, including sales comp, etcetera, and that’s affecting the fourth quarter because of the very, very strong performance. We continue that -- we continue to be spending related to the tech transformation and some of that’s flowing through on tech expense, but those are the biggest drivers. The other thing that you’ll see, and it’s a footnote on the chart, right, is tax rate is actually higher in the fourth quarter, right, year-on-year. So that negatively affects -- that negatively affects the comparison as well by $0.03 or $0.04 a share. So those factors together are what drives the difference between the revenue growth and the EPS performance.

Okay. And then I’m struggling to understand the magnitude of the change in trends in the Q4 outlook for the GCS partner channel. Is this all about kind of activity at the lead-gens and member count not being backfilled yet on the churn side? Or was there any loss of partners or any changes of terms with sizable partners pricing or how they use you?

Yes. There's a number of things in there, Jeff. And there certainly is – we’re always working with our customers to help support them in tough economic events. So I think you can attribute that to changes in perhaps pricing and things like that. But then there’s also the underlying volume is quite challenging, which is also a contributor as their customers and, of course, in our case, with our FMS business, still are not anywhere near pre-COVID levels with regards to originations.

Okay. Thank you.

And we’ll take our next question from George Tong with Goldman Sachs.

Hi. Thanks. Good morning. Mark, you mentioned that core revenue growth was 6% in the quarter, excluding benefits from unemployment claims in the mortgage market. Can you talk a little bit about what may be driving the difference between the 6% core revenue growth and non-mortgage B2B revenue performance in the quarter that was roughly flatted down?

I think if I follow your question, it's really going to be the outperformance of our mortgage businesses, which is Workforce Solutions is growing -- obviously, the mortgage market is up. As we highlighted on couple of slides in our comments, they’ve got core growth in the mortgage business. So that’s going to drive that. And the same with USIS at 600 basis points of growth in mortgage from core versus the mortgage market and Workforce Solutions multiples that from new records and new products, everything else. So that’s really what’s driving it now, which we think is very positive in a COVID recession. And of course, the rest of the non-mortgage businesses at Equifax that are still negative in many markets and verticals because of the COVID recession, those surely will recover as economic activity comes back in the future, as we get through and past the COVID market effect.

As Mark indicated, you’re right, George, I mean it’s our strategic focus to try to make sure we dramatically outgrow the mortgage market. And what that’s showing is that we’re achieving that very successfully even though the non-mortgage businesses are weaker because of COVID.

Got it. And looking at monthly trends, specifically in the non-mortgage business, USIS revenue has been largely consistent at down roughly 5% year-over-year moving through the quarter, and the non-mortgage EWS also consistently down about low single-digit if you exclude that jump that we saw in September. So, could you talk about some of the puts and takes around that to our non-mortgage revenue performance in 3Q that didn’t seem to improve moving through the quarter. But the trend seemed relatively stable, so just some picture on that.

I think it’s really about those verticals really still not recovering and we expect they will. I think our competitors are seeing similar challenges with -- whether it’s card originations or personal loan volume. The financial institutions are being quite conservative and that should be until they have some clarity around where the economy is going. When they do, they’re going to start originating again and that will be positive for us as we go forward in our non-mortgage businesses.

But to be clear, we did see improvement in September in the USIS non-mortgage relative to what we saw over the July, August period. It certainly did better. And we saw that improvement. We talked a little bit about that in the script. And the same is true in EWS. I think it did better. When I asked the question, I was simply trying to indicate don’t expect 16% to continue, right. But we did see an improving trend both in USIS non-mortgage and EWS non-mortgage during the period.

And we'll take our next question from Gary Bisbee with Bank of America Securities.

Hi. Good morning. Thanks. So I guess just to partner on innovation if I could. You have actually talked at the beginning of the tech transformation about the opportunity to decelerate innovation. I would love to just get a sense where you are with that and have you made enough progress that that is happening and if it is more of a for future opportunity, what is the timeline? And I guess the second part of that, the previous Equifax talked a lot about the concept of vitality and even use to talk annual classes of new products and sort of how the three year company forecasts for revenue on those were doing. Could you just help us think through that as well? Obviously went down from [Indiscernible] growing again is that a meaningful acceleration of innovation really that vitality going forward? Thank you.

As you know, for the last couple of quarters you’ve heard me talk about it because I really view it in the next chapter with Equifax really, accelerate our new product innovation. It’s really levers the cloud investments that we’re making. We believe that this is going to be a real catalyst for us to drive topline growth. You’re seeing an EDS about the timing and you know it’s really happening in 2019. We did it on the chart, we put in the in the early slides, we did 90 new products out from 16 in 2018. And that’s up from in the 70 to 80, range, kind of pre cyber events. So in 2019, we’re operating at higher level. And of course, we’ve gone to 90 last year to around 110 in 2020. So there’s clearly a renewed focus on it, you saw a few months ago, we brought in a new Chief Product Officer. We’re adding new product talent resources to really scale up our ability to bring new products to market. And remember, one of the reasons we’re making this cloud investments that we talked so much about it, because we’re going to put all our data assets into a single data fabric. And we believe that’s going to accelerate our ability to do data combinations and renew solutions to the marketplace. So that’s what this new product team is going to be focused on is really leveraging the cloud investments that we’re making. So what you're going to see benefits of it, you're seeing it today, you saw this quarter and we talked about some of the new products we're rolling out in the marketplace. That gives our commercial team more things to sell, and more solutions to bring to our customers. So going from 90 last year to 110 and my goal is to grow beyond the 110 in 2021, as we continue to invest in resources, and really leverage the cloud transformation. With regards to the vitality index, that’s something that we've talked about before, I guess pre the cyber event. I think it’s likely something we’ll bring back to the dialogue with our investors. We already have plenty to talk about. But if there’s interest in that, you will certainly bring that back. But new products are a key priority of ours. As I characterize it, it’s the next chapter with Equifax, it’s really going to drive our top line growth.

And I mentioned this before, but absolutely our products that are launched on the new infrastructure that are benefiting us already. And Mark talked about Luminate in his script and other fraud products. That's certainly the case, eID we talked about. So, kind of the broad fraud suit is running on new infrastructure. And then we also talked about effect of the COVID response products that were built specifically on the new infrastructure, and then we couldn’t have done otherwise. So, those are some examples. There are certainly more. And we are seeing benefits from it and we expected to dramatically accelerate as we get into the first quarter.

Thank you.

Thanks.

Our next question comes from Brett Huff with Stephens.

Hey, thanks. This is a long call. So I’ll just be quick. You talked a little bit about the analytics as one strategy and then unique data is another strategy. And I think we talked a lot about unique data today with EWS. Can you give us an update on sort of the next major phase of the analytics development you guys are thinking about, as we think about the economic recovery, not a position Equifax for that next phase of growth?

Yes, there's a number of drivers there Brett that we’ve talked about over the past couple of quarters. It starts with our Ignite, an analytics sandbox, I think, we've invested heavily in that, and we’re rolling out in the marketplace. And that’s a tool for our customers to access our data as well their own and really drive analytics and solution that will result in use of more of our data. So that’s very, very positive for us. And of course, we have a large DNA team that is focused on creating new solutions. And we talked about some of those that really are from our analytics about combining data assets that increase the predictability in some of our COVID response products, to help our customers look at using trended data to understand how our customer outperformed in the past, to use that to create predictability to how they’re going to perform in the future, adding income and employment data. Those are all part of our analytics to deliver a solution. And they result in more usage of our data or specific revenue opportunities and new scores or other ways that we deliver the analytics to drive the predictability of the decision for our customers. And we believe the cloud investments are really going to advantage us in more opportunities to bring new solutions from our DNA to the marketplace.

Great. Thank you.

And our next question comes from Shlomo Rosenbaum from Stifel.

Hi, guys. Thank you for squeezing me in over here. Wanted to talk a little bit about the competitive environment, how you guys are doing outside of the mortgage markets in terms of like win rates and pipelines? I know John you comment about the pipeline being strong, is this kind of void space where you're able to go into it’s like unique data, like the work number and credit card, or straight out and compensation are you guys kind of winning more outside the mortgage. Can you just kind of comment on that and if there’s anything quantitative you can share?

Yes. John shared some comments around our deal pipeline in USIS, which is your focus in orders that EWS pipeline is quite rich, as you might imagine it is an international DTH. But there is a lot of focus by our investors and/on Equifax, which is why we talk about the USIS deal pipeline in particular, the desktop dramatically over what it was last year and the year before, we're seeing increasing mid rates, you know, when I've used the term did – the USIS is a competitive marketplace now. In the COVID recession, that's harder to see, because you’ve got the pressures of the economic impacts from our customers, on Equifax and on USIS, but we see the deal winds coming into the global recession, you saw the kind of strength of USIS revenue, non-mortgage numbers, using that in particular in the second half of 2019 and coming into the first quarter of 2020. And we seen competitively, during the recession -- the COVID recession impacts of the second quarter, third quarter, the USIS is performing quite well. So we still got a lot of confidence in that business and its recovery.

Okay, thank you.

And that concludes today’s question and answer session. I would like to now turn the conference back to Mr. Hare for any additional closing remarks.

I just want to thank everybody for joining the call and for their interest in Equifax. I just also want to let everybody know that we will be around today and in the days and weeks ahead to answer any follow up questions that you might have. So once again, thanks for joining and this does conclude the call.

And this concludes today's presentation. Thank you for your participation. You may now disconnect.